NEW YORK: Oil futures worths dropped towards US$73 a barrel on Tuesday after the International Energy Agency (IEA) stated the Omicron coronavirus variant is ready to dent international demand restoration.
U.S. knowledge displaying producer worths at 11-year highs strengthened market expectations of quicker stimulus tapering by the Federal Reserve, which meets this week. This supported the greenback and weighed on oil, which generally transfer inversely.
Brent crude futures fell 69 cents, or 0.9%, to $73.70. U.S. West Texas Intermediate (WTI) crude futures settled down 56 cents, or 0.8%, at $70.73.
The U.S. greenback stayed close to one-week highs on Tuesday versus a basket of main currencies, bolstered by the producer worths knowledge.
“As some accelerated tapering out of the Fed turns into extra seemingly, US rates of interest are apt to raise in pushing further energy into the greenback in forcing worth weak point into the oil,” stated Jim Ritterbusch, president of Ritterbusch and Associates LLC in Galena, Illinois.
On Tuesday, the World Health Organization stated the Omicron variant was spreading at an “unprecedented” fee, prompting markets to edge lower.
“The surge in new COVID-19 instances is anticipated to briefly gradual, however not upend, the restoration in oil demand that’s underneath manner,” the Paris-based IEA stated in its month-to-month oil report.
Governments all over the world, together with most lately Britain and Norway, have tightened restrictions to cease the unfold of the Omicron variant.
The IEA lowered its forecast for oil demand this yr and the subsequent by 100,000 barrels per day (bpd) every, largely due to the anticipated blow to jet gas use from new journey curbs.
“The skies are darkening for the oversupply outlook once more,” stated John Kilduff, associate at Again Capital LLC in New York.
The Asian Development Bank on Tuesday trimmed its progress forecasts for creating Asia for this yr and subsequent to mirror dangers and uncertainty introduced on by the variant, which might additionally hamper oil demand.
On Monday, the Organization of the Petroleum Exporting Countries (OPEC) raised its world oil demand forecast for the primary quarter of 2022 and caught to its timeline for a return to pre-pandemic ranges of oil use, saying the Omicron variant’s influence could be gentle and transient.
OPEC+, which incorporates OPEC and different producers together with Russia, plan to spice up provide each month by 400,000 barrels per day (bpd) after sharply reducing output final yr.
Output within the largest U.S. shale basin is anticipated to surge to a file in January, in line with a forecast from the U.S. Energy Information Administration.- Reuters
